European Factors to Watch-Shares seen down, focus on central banks

Reuters Staff

7 Min Read

LONDON, Dec 5 (Reuters) - European shares were set to drop for a fourth straight day to trade near a seven-week low on Thursday, with investors taking some money off the table before central bank rate decisions and Friday’s crucial U.S. jobs data.

Although the Bank of England and the European Central Bank are likely to hold off any fresh policy action later in the day, the ECB’s new economic forecasts will be in focus for signs of prolonged price weakness that could lead it to act again next year.

The ECB surprised markets last month with a cut in rates to a new record low. With inflation running far below its target, analysts are looking to the new projections for clues about whether the ECB could yet take further policy measures to support the euro zone’s weak economic recovery.

“We continue to expect a more aggressive ECB stance into 2014,” Credit Agricole said in a note. “Market nervousness is likely to continue today, although activity is likely to be limited ahead of the U.S. payrolls data tomorrow.”

Better-than-expected reading of the ADP National Employment Report on U.S. private-sector jobs on Wednesday has raised expectations that Friday’s non-farm jobs data will also surprise on the positive side.

A further improvement in the labour market could prompt the U.S. central bank to trim its stimulus sooner than previously expected, a negative scenario for equities.

The FTSEurofirst 300 index hit a seven-week low and ended 0.6 percent lower at 1,273.59 on Wednesday on concerns of a cut in stimulus after data showed U.S services industry expanded at a decent pace last month, exports hit a record high in October and private-sector hiring rose in November at the fastest pace in a year.

The private sector jobs data came ahead of the government’s employment count for November on Friday. The report is expected to show a gain of 180,000 in nonfarm payrolls after a 204,000 rise in October, according to a Reuters poll. Some economists said the ADP data suggested the report could show a larger gain than the consensus forecast.

Investors will keep a close eye on U.S. jobless benefits data for the week ended Nov. 30 at 1330 GMT, with economists forecasting 325,000 new filings, up from 316,000 in the prior week. U.S. preliminary (second) GDP forecasts for the third quarter, also due at 1330 GMT, are likely to show an annualised growth of 3 percent, up from 2.8 percent in the first estimate.

“(The revised GDP estimate) is quite encouraging for the U.S. and could again encourage the Fed to reduce its asset purchases in a couple of weeks and test the water to see whether the economy can continue the recovery without its support,” Alpari analyst Craig Erlam said.

COMPANY NEWS

MERCK, AZ ELECTRONIC MATERIALS,

German drugs and chemicals group Merck KGaA said on Thursday it had agreed to buy AZ Electronic Materials, a maker of specialty chemicals used to make Apple’s iPad, for about 1.57 billion pounds ($2.57 billion).

BBVA

Billionaire Alvaro Saieh is close to finalizing a merger deal for Chile’s CorpBanca, in which he has a controlling stake, two sources with knowledge of the deal told Reuters, with BBVA and Brazil’s Itau Unibanco Holding the frontrunners.

TELEFONICA

Brazil antitrust watchdog Cade ruled on Wednesday that Spain’s Telefonica must exit its direct and indirect stake in wireless carrier TIM Participações or seek a new partner for its Vivo mobile phone unit.

UBS

The bank announced changes in its top management on Thursday, giving its financial chief expanded powers after asset management head John Fraser retired.

FLSMIDTH & CO

The Danish engineering group cut its full-year profit forecast late on Wednesday by over 10 percent after it lost an arbitration case against Danish construction firm MT Hoejgaard.

NORSK HYDRO

Norsk Hydro, one of the world’s largest producers of aluminium, expects world demand outside China to be stable next year before picking up in the next decade, the Norwegian firm said on Thursday.

TALKTALK

The chatter on Wednesday was that the London-based broadband provider’s days of independence were numbered, with Vodafone mentioned among possible suitors for the company, according to various newspaper market reports.

DEUTSCHE BANK

Japan’s securities watchdog said on Thursday it had found that a Tokyo-based unit of Deutsche Bank had violated financial regulations by lavishly entertaining pension fund clients who are considered public employees under the law.

CREDIT SUISSE

Credit Suisse said it will sell its private bank in Germany to Frankfurt-based Bethmann Bank, part of ABN Amro,

KERING

Kering has entered into exclusive talks to sell mail order and online retailer La Redoute to its managers in a fresh attempt to offload the loss-making business.

RENAULT

China’s top economic planner has approved the launch of a joint venture between Dongfeng Motor Group Co and Renault to build and sell cars in China, the country’s second-largest automaker said on Thursday.

SANOFI

Sanofi’s diabetes treatment lixisenatide demonstrated similar control over blood sugar levels whether it was administered before breakfast or the main meal of the day, late-stage trial results showed on Thursday.